AMG Critical Materials' (AMS:AMG) Strong Earnings Are Of Good Quality

Investors were underwhelmed by the solid earnings posted by AMG Critical Materials N.V. (AMS:AMG) recently. We have done some analysis and have found some comforting factors beneath the profit numbers.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand AMG Critical Materials' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$60m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. AMG Critical Materials took a rather significant hit from unusual items in the year to June 2025. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On AMG Critical Materials' Profit Performance

As we mentioned previously, the AMG Critical Materials' profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that AMG Critical Materials' statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing AMG Critical Materials at this point in time. Be aware that AMG Critical Materials is showing 3 warning signs in our investment analysis and 1 of those is a bit concerning...

This note has only looked at a single factor that sheds light on the nature of AMG Critical Materials' profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.